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How much could the insured collect, assuming the ACV of the loss is $6,000? An insured has a DP-3 covering a home that has a replacement value of $100,000. The insured carries $60,000 of insurance. Following a loss, the determined is made that it would cost $12,000 to replace the damaged portion of the home.



A. $12,000
B. $9,000
C. $6,000
D. Nothing

This question is part of Chapter 7. Dwelling Insurance
Asked by Fsspc, Last updated: Jan 11, 2020

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fsspc

Fsspc

Answered Jun 01, 2018

$9,000

B is correct. To qualify for replacement cost coverage, the insured must carry insurance equal to 80% of the replacement cost of the building. Because the insured does not carry enough insurance, the loss will be paid at proportional replacement cost or ACV, whichever is larger. In this case, proportional replacement cost ($9,000) is larger than ACV ($6,000).
 

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